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How to Get Your Estate in Order for Your Family

By | Financial Planning | No Comments

It is never too early to start planning for the long-term future. This is especially true when it comes to planning your estate.

Although it isn’t nice to think about our death, it can actually be a therapeutic, burden-lifting process to prepare how your wealth will eventually be distributed to your loved ones.

Once everything is organised and set in place, many of our clients testify to the immense sense of relief and peace of mind they experience. So the process is tremendously worthwhile, and it offers a way to take advantage of many tax reliefs and benefits.

Valuing Your Estate

Of course, one of the most important places to start is to work out how much your estate is worth. It can be helpful to work through this with an experienced, independent financial adviser to ensure you do not miss out any important assets, which might include:

  • Household contents (e.g. furniture)
  • Any owned property, including your home
  • Vehicles
  • Antiques and jewellery
  • Savings and investments
  • Insurance
  • Pensions with lump-sum payments (upon your passing)

There might be other assets to consider as well. You also need to factor in any outstanding debts you may have. These might include equity release, mortgages, overdrafts, loans and credit card debt.

Going Beyond Will Writing

Making a will is usually a vital part of any estate planning process. After all, if you do not make a will then you cannot be certain that your wealth will be distributed according to your wishes upon your death.

With that said, there is also much more you can do to reduce your inheritance tax liability (IHT) and ensure more of your estate goes to your family. Remember, IHT charges 40% on any assets you own over the nil rate band (i.e. £325,000 per person in 2019-20, or £650,000 for married couples or civil partners) plus any Residential Nil Rate Band (RNRB) which is currently £150,000, rising to £175,000. This means that a couple could leave £1M to their chosen beneficiaries. The additional RNRB is not automatic and as straightforward as you might think, there being a qualifying criteria and conditions to be met, therefore, advice is essential.

Here are some important ways our financial advisers in Lincoln use estate planning to minimise your IHT liability:

#1 Gifts

This can be one of the most effective ways to pass on wealth to your family and friends. In 2019-20, you are allowed to give away £3,000 per year in cash gifts, tax-free. Documentation of such gifts is critical to be able to prove they were made and that they are irrevocable.

Over the course of 10 years, for instance, this means you could set aside up to £30,000 towards a grandchild’s mortgage deposit rather than waiting to pass this wealth on after your death. The latter option may mean the amount is subject to tax. The former allows you to make a difference to your loved ones’ lives earlier on, and also be around to see them enjoy it.

#2 Charitable giving

This takes the idea of gifts a bit further. Not only can you give away cash to loved ones in a tax-efficient manner, you can also achieve this by donating towards causes you care about.

If you leave at least 10% of your estate to charity when you pass away, then in 2019-20 your IHT rate is reduced from 40% on assets over £325,000 down to 36%.

#3 Factor in Your Spouse

Most people who are married or in a civil partnership will be able to pass on their wealth to their partner, tax-free, upon their death. This is comforting for many people, but you should consider that it might not always be appropriate to pass everything on to your spouse or partner. For instance, if you have children from a previous relationship then you might need to factor arrangements for this into your will.

#4 Consider Equity Release

For some people, virtually all of their wealth is tied up in their property. This makes it difficult, if not impossible, to take advantage of IHT reliefs by making gifts.

One way to address this is to consider taking out equity release. Here, you borrow money against the value of your home or sell a part of it whilst continuing to live there. The money you release can then be used to pass on to your family. Provided you live more than seven years after this, the amount you give should not be subject to IHT.

However, our financial advisers in Lincoln would caution people who are thinking about going down this route. After all, equity release essentially reduces the number of assets in your possession whilst increasing your debts. You also need to factor in the possibility that you might die within the seven year period after passing the equity release sum on to your loved ones, which means it would be subject to IHT.

#5 Insurance

In some cases, you simply cannot avoid paying IHT. If this is the case for you, then you might want to consider taking out insurance to cover the tax bill. Provided you write the policy properly into a trust, any payout from this policy will not form a part of your estate.

Assuming you are in good health and not too old, the insurance cost might make good financial sense. One of our financial advisers in Lincoln would be able to assist you with working out whether this route is right for you.


These are just a handful of the considerations you need to make when planning how to pass your estate on to your loved ones. As you can see, it is quite a complex, shifting landscape which makes the whole subject quite intimidating for many people to face and figure out alone.

However, if you can work with a professional who understands your financial situation, your goals as well as the wider financial/legal landscape, then the process of organising your estate can be a rewarding, even enjoyable process.

We invite you to arrange a free, no-obligation phone call with one of our financial advisers, if you would like to start exploring the best way to secure your legacy and your family’s future.